Plexus(US:PLXS)2022-07-29 20:47Financial Data and Key Metrics Changes - Plexus achieved record revenue of $981 million for Q3 2022, exceeding guidance of $885 million to $925 million, representing a 21% year-over-year growth [8] - GAAP operating margin was 5.1%, a 110 basis point increase from the previous quarter, and above the high-end of guidance [9] - GAAP diluted earnings per share (EPS) was $1.33, exceeding guidance of $1.02 to $1.18, including $0.21 of stock-based compensation expense [9][39] Business Line Data and Key Metrics Changes - The industrial sector grew revenue by 10% in Q3, significantly above expectations of flat to low single-digit growth [22] - The Healthcare/Life Sciences sector achieved exceptional growth of 13%, exceeding expectations of a mid-single-digit increase [24] - Aerospace and Defense sector grew 4%, in line with expectations, but anticipated a low single-digit decline in the next quarter due to supply constraints [26] Market Data and Key Metrics Changes - All three market sectors (Healthcare, Life Sciences, and Industrial) showed sequential growth, with strong demand reported by customers [8][20] - The unfilled backlog remains significant, exceeding $100 million, indicating continued demand despite supply chain challenges [12] Company Strategy and Development Direction - The company is focused on operational excellence and resolving supply constraints, with optimism for continued growth driven by strong customer demand and new program ramps [7][19] - Plans to expand the new facility in Bangkok, Thailand, are underway, with expectations for it to support future growth in the APAC region [15][16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about revenue growth into fiscal 2023, despite macroeconomic uncertainties and supply chain challenges [17][19] - The company anticipates achieving a GAAP operating margin target of 5.5% as it progresses through fiscal 2023 [14][36] Other Important Information - The company completed a $50 million share repurchase authorization, purchasing approximately 149,000 shares [40] - Cash cycle at the end of Q3 was 102 days, consistent with expectations, with inventory days increasing by 6% due to supply chain challenges [42][43] Q&A Session Summary Question: Commentary on lower margins for the fourth quarter and confidence in fiscal 2023 projections - Management noted that the guidance for Q4 margins is only down 10 basis points, with confidence stemming from strong customer demand and operational improvements [52][54] Question: Strategic opportunities in EMEA - The EMEA team has achieved significant wins driven by existing customer relationships, with expectations for continued success [55][56] Question: Customer sentiment amid economic uncertainty - Customer demand remains strong, with many reporting backlogs extending into 2023, indicating resilience despite potential economic downturns [58] Question: Expectations for unfulfilled backlog clearance - The backlog is primarily due to supply constraints, and management expects it to continue rolling out as supply normalizes [72] Question: Revenue contribution from the Thailand facility - Minimal revenue contribution is expected initially, but significant growth is anticipated by the end of 2023 as programs transition from other facilities [81][82] Question: Discussion on inventory and working capital - Management is optimistic about generating positive cash flow in 2023, with ongoing improvements in inventory days and customer deposits [63][64] Question: Impact of inflation on margins - Management acknowledged some margin pressure due to inflation but remains confident in achieving long-term margin targets [104][106]